Shares of Shopify (NYSE: SHOP) were getting torched today after the high-priced e-commerce stock posted solid results in the first quarter, beating estimates, but investors balked at its outlook for the second quarter.
As a result, the stock was down 19.8% as of 10:39 a.m. ET on Wednesday.
Shopify comes up short
The e-commerce company delivered solid results in the first quarter, but the stock’s price tag comes with high expectations from investors.
Revenue in the quarter jumped 23% — or 29% when adjusting for the sale of its Deliverr logistics business — to $1.86 billion, which edged out estimates at $1.84 billion. Growth was balanced as subscription-solutions revenue was up 34% to $511 million, driven by new merchants joining the platform and by increases to its subscription prices. Merchant solutions, which include services like payments, shipping, and financing, rose 20% to $1.4 billion.
Gross merchandise volume (GMV) rose 23% to $60.9 billion, while gross payment volume improved 32% to $36.2 billion, going from 56% to 60% of GMV.
On the bottom line, adjusted earnings per share (EPS) jumped from $0.01 to $0.20, beating estimates at $0.17.
Free-cash-flow margin in the quarter was also solid at 12%, though both that figure and adjusted EPS ignore share-based compensation, which totaled $105 million in the quarter.
The second-quarter outlook disappoints
Shopify expects revenue growth to slow in the current quarter, forecasting an increase in the high teens or low-to-mid 20% range, excluding the impact of the sale of Deliverr. It also called for its gross margin to fall 50 basis points sequentially.
That revenue forecast was slightly worse than the analyst consensus, spooking investors because Shopify remains an expensive stock, with high expectations baked into the price.
The slowdown doesn’t seem to be cause for alarm given the top-line growth, but a pullback on the stock seems warranted as Shopify still trades at a lofty price-to-sales ratio of 14.
Should you invest $1,000 in Shopify right now?
Before you buy stock in Shopify, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Shopify wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $554,830!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of May 6, 2024
Jeremy Bowman has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
Why Shopify Stock Tumbled Today was originally published by The Motley Fool
